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The Summit Company makes a single product called a Horn. The company has the capacity to produce 40,000 Horns per year. Per unit costs to
The Summit Company makes a single product called a Horn. The company has the capacity to produce 40,000 Horns per year. Per unit costs to produce and sell one Horn at that activity level are: The regular selling price for one Horn is $60. a special order has been received from the Fairview Company to purchase 8,000 Horns next year. For this special order, the variable selling expense would be reduced by 25%. However, Summit would have to purchase a specialized machine to engrave the Fairview name on each Horn in the special order. This machine would cost $12,000 and it would have no use after the special order was filled. If Summit can expect to sell 34,000 Horns next year through regular channels, at what special order price from Fairview should Summit be economically indifferent between either accepting or not accepting this special order? A. $51.00 B. $48.20 C. $42.50 D. $39.60 E. $46.75
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